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Cadillac Offers Buyouts to 400 US Dealers

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Cadillac is changing things up on the dealer side of their business and it might mean the end of 400 US dealerships. Its new dealer incentive plan is called Project Pinnacle, and it stands to be a challenge to smaller dealerships. Cadillac understands this, so they’re offering those dealerships a buyout if they want to walk away from the brand.

Project Pinnacle is set to go into effect on January 1 and dealers have until November 21 to decide if they want to bail out. The buyout offers range from $100,000 to $180,000 with most getting around $120,000. If they take the buyout, then they have until the end of next year to close up shop. It sounds like a bad thing, but Cadillac sees it as a good thing.

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Their new incentive program puts stores into one of five tiers based largely on sales volume. The higher a store’s volume, the better the incentives. Those high-volume stores will only get the best incentives if they meet strict new standards.

Smaller stores won’t have to meet the same standards, but they also won’t be able to stock vehicles onsite. Instead, they’ll have to work with customers and have them order vehicles through a virtual showroom. That’s not exactly the best deal for small dealerships, so Cadillac is giving them an out.

The Cadillac dealers affected by the buyout each sold less than 50 cars in 2015. They account for a whopping 43 percent of dealerships, but only 9 percent of sales. Your local Cadillac dealership could disappear, but only if they weren’t selling many cars in the first place.

It’s sort of like Cadillac decided to cull the herd.

That is, assuming that there’s not legal action to stop this plan. Dealer associations in several states are not happy and say the plan violates franchise laws. Although no Cadillac dealers are being forced to close, staying open for smaller franchises puts them at a huge disadvantage to the big guys, and it’s one they might not be able to overcome.

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There will be some dealerships that will be happy to take advantage of the offer and closing stores is sure to hurt Cadillac’s sales in the short term. In the long term, they think it will boost sales by sending customers to dealerships that are focused on the brand and more ready to make a sale.

Cadillac will begin contacting affected dealerships next month to make official offers. Expect the number of places you can buy your next Cadillac to be much more limited by the end of 2017.

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Nicole Wakelin

Nicole Wakelin